Credit Cards, Should They Be Used to Pay Off Loans

The idea of a low-balance transfer is enticing. They are also a large part of credit card companies’ offerings. This is one way to attract new business in a field that is already overwhelmed with credit card offers. Some have considered using their high-limit, low-interest credit cards to pay off a car loan to save monthly interest and pay off the lender. While this may seem like a great idea. Instead of continuing to rack up interest on a car loan, why not go with a lower rate and get the title of your car?

Should I use my credit card to pay off my loans?

credit cardsVery few have figured out how to play the system, so to speak. They endlessly transfer their balances to different low or no interest cards. Sometimes they score big and get travel points or even cash-back rewards. This is almost like giving yourself a debt consolidation loan. Allowing yourself to avoid lower interest credit card fees.  However, consumers need to be careful in how they manage their balances, their payments and when opening new accounts to pay off old accounts. It can have an impact on your overall credit utilization. Those that use balance transferring to pay off a car loan should also be wary. Car loans don’t carry the same weight as credit cards when it comes to evaluating your credit score. Transferring a balance to pay off your car could have a positive impact. However, having much larger credit card debt can also be negative.

Some balance-transfer plans also prohibit the use of paying off a car. Auto lenders may also have a penalty for early payoff. It’s important to do the research before making any moves. Be sure to read the fine print and continue to pay your bills While that zero percent interest offer seems like a great idea, the lender knows that many consumers will not be able to pay off their balance before the interest-free time limit expires. If you miss the deadline, this could be an even larger balance.

Posted in Credit Cards.